Metrics play a key role in monitoring the success of any sized brokerage. MoLo Solutions CEO Andrew Silver and Arrive Logistics CEO Matt Pyatt reflected on the metrics that mattered most as their companies transitioned throughout the growth process during the FreightWaves 3PL Summit on Tuesday, July 21.
Initial metrics: focus on growth
While raising capital is certainly an important part of any burgeoning business, focusing on growth opportunities is arguably the most effective strategy for long-term success.
“When starting a freight brokerage, it’s imperative that you know what you’re trying to accomplish and understand the resources that you have at your disposal,” said Silver.
He continued, “You can’t compete without having a strong network and you can’t do that without having scale to get to that point.”
On the customer side of the business, Silver suggested company leaders consistently strive to expand their business networks as well as to maintain focus on securing as many loads as possible. When it comes to carriers, he urged brokers to ask themselves how many carriers the company is contacting and if they’re merging each carrier’s needs with that of the customer base.
“We’re still growth-obsessed today, but we’re trying to be smarter and more strategic on how we connect our carriers and customers to get their networks to align,” Silver added.
Founded in 2017, MoLo Solutions is a Chicago-based third-party logistics provider. The company plans to open a Nashville, Tennessee office in January 2021.
Pyatt echoed Silver’s sentiment agreeing that focusing on growth strategies early in a brokerage’s development stage is crucial when companies initially lack the high-end resources needed to track critical metrics. It wasn’t until about three years into operations that Arrive raised sizable capital enabling it to focus on growing its core customer and carrier base, according to Pyatt.
“In the beginning, it’s common to service the best that you can even though you lack a technology stack that can tell what your on-time delivery is,” Pyatt said. “You become so dependent on your customers providing all the data.”
Pyatt added that as Arrive reached the $250-$300 million mark, the company embraced a data-driven approach measuring service metrics through new proprietary software. It also shifted its focus to coverage scorecards, employee engagement, award management, as well as measuring contractual and spot freight ratios.
Founded six years ago, supply chain service provider Arrive Logistics is based in Austin, Texas but has since expanded to locations in Chattanooga and Chicago.
Utilizing service metrics
“Nobody knows who you are day one,” Silver said. “Being able to develop a reputation in the industry as a reliable service provider gives you an advantage as well as an opportunity to focus more on the data.”
Silver affirmed that data-driven decision-making is a critical aspect for any business but what sets apart successful brokerages from the rest are the ones that know exactly which data sets deserve consistent attention. He credited MoLo for its customer-focused, data-driven approach when it comes to determining what their customers expect from their broker and predicting their current and future needs.
Both Silver and Pyatt urge brokers not to disregard scorecard insights as they benchmark performance against competitors. Arrive has taken it one step further by implementing its own internal service score system based on aspects of the carrier/rep relationship.
“Whether it’s metrics that we look at or those that employees look at, when you hold your employees accountable to metrics, it really drives the right results,” Pyatt said.
Maintaining contractual freight growth
“Shippers are asking more from their providers, so if you’re not able to provide great visibility, it’s almost impossible to grow your contractual freight,” Pyatt said.
He argued that many brokers get stuck at $50-$200 million in size for several reasons including the lack of liquidity and working capital to invest in growth, remaining content with their current profitability, in addition to not having the internal systems and process to move contractual freight effectively.
Pyatt and Silver noted Arrive’s freight as around 50%-52% contractual for Arrive and 70% contractual for MoLo – the highest it’s ever been for the brokerage.
“If you want to grow quickly, you’ve got to do it through contractual freight volumes,” Silver said. “Many mid-sized carriers don’t want to work with brokers with inconsistent lanes. They’d rather work with someone who has committed volumes that they know they can rely on through peaks and valleys because that’s what a partnership really is.”
“I truly believe that our employees are customers of ours. If we don’t create the best atmosphere for them, they’ll go work for someone else,” Silver said. “Our industry has 15,000 competitors that will offer them a job. It’s imperative that we keep them engaged.”
Silver noted that even though every company in the world is experiencing employee engagement issues to an extent because of the COVID-19 pandemic, that hasn’t stopped MoLo from keeping its workforce in the loop. The company regularly conducts employee surveys, which Silver proudly stated have a response rate of 80%.
“Arrive is making sure it has the right ratio of employees right now because we’re hiring on a needs basis because we’ve adapted to the economic conditions to operate on a loads per day basis, not a revenue basis,” Pyatt said. “We’re making sure that we have the right operations support and capacity. Once we know where the market is heading, we’ll put our foot back on the gas.”
Photo credit: FreightWaves, original article posted here: https://www.freightwaves.com/news/freightwaves-3pl-summit-metrics-that-matter-with-video